Being an entrepreneur is not for the faint-hearted. In the very beginning, it’s especially hard. That’s true for any new endeavor, but with the stories we see or hear about – of “instant Internet wealth”, people make up movie-like scripts in their head that never quite play out. It’s exciting, it feels like you are pitching a major Hollywood deal, or something. Here are some examples:
#1 MYTH: “I have a great idea for a new business, I just need 1 million dollars to get it off and running”.
#2 MYTH: “I have a fantastic idea that could make this a billion dollar a year venture, just need a small slice of the Internet marketplace”.
#3 MYTH: “My idea is so good and different, I just need some solid money for advertising, and we’ll go public in 2 years”.
Many of us were helping businesses to start & grow during the dot com rise of the late 1990’s. It was serious business then as now, but the basics somehow got tossed out the door, and we forgot what sound business was all about.
What are some of the fundamentals of starting a business you must consider?
First of all, you don’t need an MBA or major business degree to figure this stuff out. Basic principles (read: common sense) apply that you could learn by picking up a business book at Barnes & Noble. (However, don’t take this lightly – as you’ll see below).
In the rush of things, even the seasoned business person may lose sight. Here are some important principles to keep in mind. (and, today’s business is more than “build it, and they will come“, ok!?)
#1 – Loving the idea.
Every new entrepreneur is in love with their idea. So much so, that they ask everybody to sign a non-disclosure agreement. If you ask for a business plan, it’s rare to get one, and one that:
- Shows you a way that deals with a unique,already established business problem, and makes it better
- Goes after a larger marketplace, in the 1-5 billion dollar range to start (it depends here)
- Has the ability to “branch out”, so that horizontal and vertical markets can be included over time
- Can be fully executed by a strong team with intelligence within that marketplace
You must have a strong team that understand the space, and can execute within it. Hiring friends who’d like to “join to make money” is the kiss of death. You may not have all the expertise or team just standing by, but you must be aware of this very important piece. Hiring people better than you is a good way to go.
#2 – Just build it.
Back to the build it and they will come concept. It’s not a good idea. The dot com rise and bust had too many organizations built around this concept. You need to make sure the market is validated, and that it is something customers will (gladly) pay for. You’ll know in detail who your competitors are, and investment capital will be easier to get as well.
#3 – Fix it in production.
Guy Kawasaki, the original Apple evangelist talks about launching versions that weren’t necessarily ‘perfect and ready’, but he and Apple management knew by the time they made it truly bullet-proof, the market would have passed them by, or all capital would have been burned up. (TIP: Download the FREE “The Macintosh Way” ebook to find out more). *I used to work at Ashton-Tate. You’ll see references to Guy’s challenges with the executive team inside the book. Pretty revealing stuff…;-)
#4 – Money first.
Most startup owners feel that they must have boatloads of money before starting. Successful business builders, however – do it in stages, and don’t take on as much risk along the way. Having a safety-net makes the organization bleed money, and taking on many investors will dilute the value for early stage investors. Move your business across key milestones first.
#5 – No business plan.
A bulky business plan may look impressive, but long term investors really only want to know a few things:
- Intelligence, expertise to get the job done by your management team
- That the marketplace exists, and that you’ve done a good job validating it
- What is your speed-to-market
- What size of funds needed to reach key milestones and why
- A breakdown of the revenue model and how you deliver it (product/service)
Finally – you need to understand and explain your advertising, marketing & sales strategies. You’ll need to have and show a plan for the course of 1 year, 2 year, and 3 year and beyond (it depends). That would include online and offline branding, public relations, direct marketing, telephone prospecting, online seminars, partnerships/alliances, tradeshows and many more.
For every win, celebrate, but don’t rest on your laurels. Be careful not to get too “fat”. The competition would like to see you fail any day. Staying close to innovation, and never getting lazy will put you in a strong position for long term business success.
What do you think?
- Richard Branson on the Myth of the Lone-Wolf Entrepreneur (entrepreneur.com)
- Busting (or not) 10 top myths about technology (news.cnet.com)
- 13 Questions to Ask an Entrepreneur (leximo.org)